New Delhi: Reserve Bank of India’s board will meet today – the first meeting to be held after Shaktikanta Das assumed charge as new governor of the central bank. Das, a former finance secretary, took office two days after Urjit Patel abruptly resigned as governor on Monday. The 18-member board, which includes monetary policy makers, finance ministry representatives and industrialists, is expected to discuss issues relating to easing of lending restrictions on some of the country’s weakest state-run banks. RBI’s board may also focus on liquidity in the financial system. The board at the November 19 meeting had agreed to set up a committee to determine the appropriate levels of reserves the central bank ought to hold.
The new RBI chief on Thursday met with the heads of public sector banks who sought some relaxations in the prompt corrective action (PCA) framework and the one-day default norms announced by the RBI in its February 12 circular. Das, along with his four deputy governors, discussed various issues being faced by the banks, including that on liquidity situation, and also deliberated on the crisis in the non-bank lenders space.
Of the 21 state-owned banks, as many as 11 are under the PCA framework, which imposes lending and other restrictions on weak lenders. These lenders collectively control around a fifth of the credit and deposits in the system. The bankers also sought some easing in the one-day default norm announced in the February 12 RBI circular, said another banker.
The government had come under opposition attack after Urjit Patel resigned abruptly, 10 months before the completion of his term in September next year. Finance minister Arun Jaitley on Thursday admitted there were two-three areas of differences with the RBI but questioned how a mere discussion on its functioning could be considered “destruction" of an institution.
Speaking at an event in Mumbai, Jaitley said differences with the RBI included credit flow in the economy and liquidity support, and added the government had initiated a “discussion" to convey its concerns. “A discussion with an important institution, which is independent and autonomous, to tell it that it’s a part of your (RBI’s) functions and therefore this is an important area of an economy which you must look at, how is it destruction of the institution?" Jaitley said.
Ahead of the board meet, railway minister Piyush Goyal said tweeted that “there was never any intention that RBI’s capital should be transferred to government. But their capital reserves are amongst the highest and are not being put to good use. It could possibly have been used to support the banks just as was done in USA during the financial crisis."
With inputs from agencies